Airtel distribution expansion & market services in rural areas
Rural Distribution
-
Upload
ajit-mohanty -
Category
Documents
-
view
228 -
download
0
Transcript of Rural Distribution
-
8/3/2019 Rural Distribution
1/29
12-1
Rural Distribution
-
8/3/2019 Rural Distribution
2/29
12-2
Learning ObjectivesLearning Objectives
Grasp the realities of Indian rural retail channel
Examine strategies for managing rural retail channel
Understand limitations of traditional distribution channel
Examine opportunities for organized rural retailing
Be aware of threats and challenges for organized rural
retailing
-
8/3/2019 Rural Distribution
3/29
12-3
Retail: An IntroductionRetail: An Introduction
Retailing is, All the activities involved in selling
goods or services directly to final consumers for their
personal non-business use.
Retail mix is the mix of variables including price,
location, communications, merchandise, physical
attributes, services and personnel.
-
8/3/2019 Rural Distribution
4/29
12-4
Retail: An IntroductionRetail: An Introduction
Retail is primarily classified into two sectors as:
organised and
unorganised retail sector
Organised retail sector has a single organisation having
large format retail stores providing wide varieties of
goods in good number of locations.
Unorganised sector has large number of organisations
having single, small retail outlets with limited variety at
single location.
-
8/3/2019 Rural Distribution
5/29
12-5
Indian Rural Retail MarketIndian Rural Retail Market
Rural markets are relatively virgin markets, which
evolved on their own with very little direct contact with
them by the corporate world, but their size is compelling
and attractive.
Of 33 lakh retail outlets in India in 1999, 21 lakh were in
rural areas.
7 Indian states account for 76% of countrys total rural
retail outlets.
184 districts accounted for 69% sales in 1999.
-
8/3/2019 Rural Distribution
6/29
12-6
Indian Rural Retail MarketIndian Rural Retail Market
In interior villages retailing is part time chore in a part of
house. The maintenance costs for retail outlets in interior
villages are also low with most of cost spent on traveling
and transportation.
In the 6,27,000 villages penetration into rural areas is
facilitated through the wholesaler, semi wholesaler, arhatia
and itinerant merchant network through 3000 odd towns,
5000 wholesale assembly markets (with lot of overlap) and
about 25,000 'haats/shandies'.
-
8/3/2019 Rural Distribution
7/29
12-7
Indian Rural Retail MarketIndian Rural Retail Market
One of main reason for explosion of retail and its
fragmented nature is that it is a form of disguised
unemployment / underemployment.
Overcrowded agriculture sector, stagnating manufacturing
sector, hard nature of jobs and low wages in both, manyIndians are virtually forced into retail sector.
-
8/3/2019 Rural Distribution
8/29
12-8
Indian Rural Retail MarketIndian Rural Retail Market
Given lack of opportunities, it is almost natural decision to
open a small shop depending on the available means and
capitals. This explains the million of kirana shops and
small stores.
Number of product categories stocked by rural retailer is
almost the same for FMCG products as an urban retailer.
If, rural retailer was stocking 19 product categories then
the urban retailer stocks 27.
-
8/3/2019 Rural Distribution
9/29
12-9
Indian Rural Retail MarketIndian Rural Retail Market
What varies is the number of companies they are
dealing with, 42 for rural and 92 for urban. So when we
multiply number of companies by their brands or
variants and Stock Keeping Units (SKUs), difference
come in thousands. If there are 30 categories, each
has 30 brands and for each there are 30 SKUs. It
becomes 27,000 SKU.
-
8/3/2019 Rural Distribution
10/29
12-10
Strategies forStrategies for
Rural Retail Channel ManagementRural Retail Channel Management
Retailers are closest to POP and have access to a wealth of
information on consumer shopping behaviour.
Retailers have unique advantages for managing brands:
continuous and actionable dialogue with consumers, control overbrand presentation at point-of-sale, control over shopping
environment, display location/adjacencies, and signage.
Retailers relation with customer is based on the understanding of
their needs and buying habits and is cemented by retailer credit.
Rural areas having different retail environment; require separate
marketing strategies in order to penetrate into rural markets.
-
8/3/2019 Rural Distribution
11/29
12-11
Understanding Retailer Behaviour: To develop ability toinfluence retailer to stock and promote products of an
organisation requires identifying the manner in which he
performs retailing.
Mega Marketing: Organisations need to plan and implement
integrated effort for managing rural retail channel. Stand-
alone efforts are likely to provide limited success.
Ensuring Availability: Availability is not a substitute forcreating purchasing power or driving preference, but is a first
step towards it. If marketer delivered their product at retailer
doorstep, they might prefer those products or brands
because; their time and transportation cost is reduced.
Strategies forStrategies for
Rural Retail Channel ManagementRural Retail Channel Management
-
8/3/2019 Rural Distribution
12/29
12-12
Provision of Credit: By selecting financially strong
distributors and stockists, organisations can ensure
provision of credit to the rural retailers through these
channel partners.
These channel partners can decide the quantum of
credit to be offered to which retailer on the basis of
their local knowledge.
Companies can have a tie-up with banks and financialinstitution for the provision of credit to their distributors
so that they can buy the goods from the companies in
even larger quantity and can then provide these goods
to the creditworthy rural retailers at a credit.
Strategies forStrategies for
Rural Retail Channel ManagementRural Retail Channel Management
-
8/3/2019 Rural Distribution
13/29
12-13
Provision of Quantity Based Discount for
Distributors: By offering quantity based discounts,
organisations can motivate distributors to lift stocks in
good quantity and then to make special efforts to take
them to rural retailers. Appointing Rural Sub-stockists: Organisations can
appoint the sub-stockists in the rural areas itself, in the
larger villages. These sub-stockists on the basis of their
in-depth knowledge of adjoining villages can distribute thegoods to retailers in the smaller, interior and adjoining
villages in a cost effective manner and can serve retailers
in the villages on regular basis.
Strategies forStrategies for
Rural Retail Channel ManagementRural Retail Channel Management
-
8/3/2019 Rural Distribution
14/29
12-14
Provision of Van Subsidy for Rural Distribution:
Organisations can provide van subsidy to distributors
who use vans to distribute products in rural areas. These
subsidies can be linked with sales volume or mileage
depending on the market scenario of the region. Exclusive Distribution Network for Rural Sector: This
focused approach has its own advantages as well as
challenges. If the rural markets can get better attention
and service and enable deeper penetration and more
revenues then there can be channel conflict because of
the consequent overlaps.
Strategies forStrategies for
Rural Retail Channel ManagementRural Retail Channel Management
-
8/3/2019 Rural Distribution
15/29
12-15
Placement of Company Staff with the Distributors:
To monitor and motivate sales effort of distributors in
rural market. These staff members can be selectedlocally to have better knowledge of local terrain and will
also be able to talk with rural retailers in local dialect.
They can act as eyes and ears of company and can
conduct formal and informal research at retailer andconsumer end and inform company on a periodic basis
competitors moves of the in their territory.
Strategies forStrategies for
Rural Retail Channel ManagementRural Retail Channel Management
-
8/3/2019 Rural Distribution
16/29
12-16
Modern Distiribution ModelModern Distiribution Model
1.SHG MODEL: Project Shakti(HUL)
2.YOUTH ENTEREPRENEURSHIP MODEL:Shaktimaans
(HUL),Eveready,Van,PDS,Co-operative Societies,Petrol Pumps &
Extension Counters,NGOs,Rural Mobile Traders
RURALLOGISTICS: Hub & Spoke System(Coca-cola),Syndicated
distribution(BharatiAitel& SKS,IFFCO
-
8/3/2019 Rural Distribution
17/29
12-17
Summary: Points to PonderSummary: Points to Ponder
Indian retail market is not only one of the largest in the
world but also the most fragmented one.
Serving rural market through rural retail outlets is one of
the most challenging task for the FMCG organisations.
Organisations especially those marketing FMCGs need
to undertake in-depth analysis of rural retailer behaviour.
Ensuring availability of goods at the rural retailers shelf
is critical for an organisation that intends to target the
rural market effectively.
-
8/3/2019 Rural Distribution
18/29
12-18
Summary: Points to PonderSummary: Points to Ponder
Organisations need to ensure provision of credit for rural
retailers by selecting financially strong distributors and
stockists and than helping them to have the credit facility
from the banks so that they can further provide credit to the
rural retailer.Organisations can offer retailer promotion schemes on the
quantity based discounts. This will ensure undertaking of
special efforts by the distributors to take goods deep into the
rural market.Organisation can also consider setting up of exclusive
distribution channel or appointing special sub stockists for
serving the rural market
-
8/3/2019 Rural Distribution
19/29
12-19
Limitations ofLimitations of
Traditional Distribution ChannelTraditional Distribution Channel
Push strategy
Very basic level of service
Spurious, adulterates and counterfeits
Limited choice to the rural customer
Strong bargaining power of retailer
-
8/3/2019 Rural Distribution
20/29
12-20
Opportunities for Organised Rural RetailingOpportunities for Organised Rural Retailing
Rising aspiration of the rural consumers; to have urban
like experience while shopping.
Integrated package of products and enablers are available
under single roof.
Provision of advisory services along with the products can
build the association with these stores.
Increasing desire in rural areas to buy quality products and
frustration with counterfeits and fakes.
Rural retailers charging more for the same products.
Opportunity to provide an outing to family and kids.
-
8/3/2019 Rural Distribution
21/29
12-21
Challenges for Organised Rural RetailingChallenges for Organised Rural Retailing
These newly set up organised retail stores for rural market, either owned
or franchised by the large corporates are going through learning phase.
They're grappling with high fixed costs, low revenues and channel
conflicts with existing dealers and credibility issues.
Availability of credit for the rural consumer at the Kirana store, which
might not be available at these organized rural super markets. Most of
the rural consumers do not pay at the end of the month but after harvest
(after 3 or 4 months).
There is lack of organized institutional mechanism to lend money on
credit to farmers with undependable and irregular income streams.
-
8/3/2019 Rural Distribution
22/29
12-22
Challenges for Organised Rural RetailingChallenges for Organised Rural Retailing
Loyalty of rural consumer with the retailer is higher than
the brand loyalty.
Seasonality of the demand is tied with the harvest andfestivals and daily wage earners only getting small dues
on daily basis (for max 20 days a month during off
season).
During the monsoons good numbers of villages are cut off
from neighboring villages and towns.
-
8/3/2019 Rural Distribution
23/29
12-23
Strategies for Organised Rural RetailingStrategies for Organised Rural Retailing
Experiments in domain of organised retail for rural world are inadvanced stage. There have been good learning and accordingly
suitable modifications are being made in proposed business
models.
In case of ITC and some others there is a strategy in the place.
To make immediate payment to farmers who sell his produce at
the mall and thus farmer has a ready cash to make bulk
purchases for the few months at one go. Along with that there is
attraction for him to bring his family and children in form of
amenities like cafeteria and games. Presence of the family
members that too with cash creates a right situation for
marketers to target rural audience for selling their products and
services.
-
8/3/2019 Rural Distribution
24/29
12-24
Strategies for Organised Rural RetailingStrategies for Organised Rural Retailing
Some of the retailers like Shubhlabh of Mahindras aredeveloping tie-ups with banks and insurance companies and
making their presence under the same roof as enablers for
the purchase in case of non-availability of cash with the
farmers.
Provision of value added advisory services could be of great
advantage to bring in new consumers to these retail outlets
for the first time. Then the experience of providing quality
products can take over from there to build a long-term
relationship with the rural consumers.
-
8/3/2019 Rural Distribution
25/29
12-25
Strategies for Organised Rural RetailingStrategies for Organised Rural Retailing
Appropriate merchandising and integrating solutions as a
package that can meet the needs for all types of
consumers can be a good strategy to serve the needs of
the relatively poor people to some extent.
Organisations can start by opening retail outlets in the
regions or states, which have relatively better connectivity
and are less likely to face the transportation problems
during the rainy season.
-
8/3/2019 Rural Distribution
26/29
12-26
ConclusionConclusion
The organized retail formats are offering good quality branded
products and the value added services for villagers.
This is first time such an attempt is being made and this will definitely
ensure that the consumers are not purchasing fakes andcounterfeits.
The future scenario with respect to these will be determined by the
overall success achieved by these initial experiments.
Only thing is how to scale up the model and still keep the operational
and capital expenditure low to make a decent return on investments
made in the process.
-
8/3/2019 Rural Distribution
27/29
12-27
Summary: Points to PonderSummary: Points to Ponder
To provide last mile connectivity with rural consumers,
corporate sector is establishing branded stores in rural
and semi-urban areas.
If it is a forward integration strategy for some players, for
others it is a strategy to overcome limitation of
conventional distribution channel.
This is a new format where players are in learning phase
and are experimenting with different options. These
options range from company owned stores to joint
ventures and also through the franchisee route.
-
8/3/2019 Rural Distribution
28/29
12-28
Summary: Points to PonderSummary: Points to Ponder
Even the petroleum companies have started to leverage
their wide distribution network of petroleum retail outlets to
market non-petroleum products.
Rising income level and aspirations, increasing demand for
quality quality products and counterfeits are the reasons
which justify potential and opportunities for organized and
products, desire for urban like experience, frustration with
low branded retail outlets in rural areas.Provision of credit by rural and semi-urban retailer, loyalty
of rural consumer with existing retailers that have served
their needs for decades, seasonality of demand and lack of
around the year accessibility of these stores to the rural
-
8/3/2019 Rural Distribution
29/29
12-29
Summary: Points to PonderSummary: Points to Ponder
Corporates will have to develop strategies to lower down
the infrastructure and operational costs and resolveconflict with existing channel partners, then only they will
be able to leverage and set-up these stores on a large
scale at national level.